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Eurozone Services PMI Weakened: Will It Affect the Business Climate?

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Eurozone services PMI in August

According to a report by Markit Economics, the Eurozone services PMI (purchasing managers’ index) stood at 54.7 in August as compared to 55.4 in July 2017. The figure missed the preliminary market estimate of 54.9. Among the member countries of the Eurozone, Spain (EWP) and France (EWQ) posted weaker service PMIs for August 2017.

Between September 2016 and May 2017, the Eurozone services PMI has risen consistently. Then, since June 2017, the PMI has weakened. The softer performance in August was mainly due to the following factors:

  • Production volumes and output rose at a slower pace in August 2017.
  • New business orders and export orders grew at a weaker pace in the same month.
  • Job growth in the economy also slowed in August 2017.
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Performance of ETFs

The iShares MSCI Eurozone ETF (EZU) and the Vanguard FTSE Europe ETF (VGK), which tracks the performance of the Eurozone (HEDJ) (FEZ) (IEV), rose marginally in August 2017.

The Eurozone manufacturing PMI improved sharply in August 2017. The rising manufacturing activity suggests that client demand rose in this sector. However, the weaker service PMI is signaling that the service activity narrowed in August. However, major indicators of the Eurozone are signaling that the Eurozone economy is becoming healthier. The business sentiment is also improving gradually.

In the next part of this series, we’ll analyze US retail sales in August 2017.

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